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Block 2: Session 6/7 - Coggle Diagram

- - - - Path Dependency - The "arm's-length" approach is how the international tax system has emerged, and there will be great institutinal resistance to change established practices. Still, the alternative of unitary taxation is not an all-or-nothing approach requiring everyone to adopt it at once. It could be adopted by some states and not others, or hybrid versions between unitary taxation and the arms length approach could be adopted as interm steps
      - Vested Interests - Because multinational corporations like having the leeway to manipulate transfer pricing, they have a strong interest in maintaining the status quo
      - Technical Issues - There are potentially important technical complexities in designing an appropriate formula, and more work needs to be done in this area
      - Current accounting standards require corporations to publish certain financial and other data but they allow them to sweep up all the results from a range of different jurisdictions and put them into a sngle aggregate figure, perhaps under a heading "Internation" or some such. It s not possible to unpick multinational corporations2 financial statements, to determine what is happeneing in each countrry or operations Would Require the following info:
        
        The name of each country in which it operates
        
        The names of all its subsidiaries and affiliates in each country in which it operates
        
        The performance of each subsidiary and affiliate in each country in which it operates
        
        the tax charge included in its accounts of each subsidiary and affiliate in each country in which it operates
        
        Details of the cost and net book value of its fixed assers locates in each country in which it operates
        
        Details of its gross and net assets for each countryin which it operates
        
        Country by country reporting would also disclose if there was a deliberate material mispricing of goods and services across international borders. . Important to determine whether arms length principles are being cimplied with
- - - - countries around the world use IFRS. And with many more countries in the process of transition, these are fast becoming the global accounting language
- - - - IFRS Standards are developed by the board, which is the standard-setting body of the IFRS Foundation and independent private secor, not-for-profit organisation. formed in 2001 as successor org to the International Accounting Standards Commity IASC which had been international accounting standards IAS since 1973. London based with global mission.
        The board is committed to developing in the public interest a single set of high quality global accounting standards that provide investors, lenders and others with relevant, transparent and comparable information in general - purpose financial statements
      - The Vision in 2000: a single set of global accounting standards
        
        The founders of the board set out the fundamental objective of the board and the IFRS doundation under which it operates in a constitutin adopted in early 2000: "To develop in the public interest, a single set of high quality, understandardable and enforceable global accounting standards that require high quality, transparent and comparable information in financial statements and other financial reporting to help participants in the worlds capital markets and other users make economic decisions
        
        that vision has been publically supported by many international org, including the G20, World Bnk, IMF, Basel Committee, IFAC and Eurepean Parliament and Council
        That vision is consistent with the objective of the boards predecessor standard setting body, the IASC, which developed IAS standards from 973 to 2000
      - The vision has not changed since 2000
        
        In Feb 2012 the trustess if the IFRS foundation completed a strategy review and published their report. They reaffirmed their commitment to achieving the vision of global accounting standard. The trustees report on theri review said that they remain committed to the belief that a single set of IFRS standards is the best interst of the global economy, and that any diverfence from a single set of standards once transtion to IFRS standards is complete, can undermine confidence in financial reporting
      - Convergence is not suitable for adoption
    - - Globally recognised for the preperation of financial statements by business entities
        
        the items should be recognised as assets, liabilities, income and expese
        
        how to measure those items
        
        how to present them in a set of financial statements
        
        related discolsures about those items
    - - Developed by the IASB (the board)
        
        independent setting board overseen by geographically and professional board of trustees
        
        14 full time members from 11 countries with varied professional backgrounds
        
        have staff of 150 people from 30 countrues (in UK) with small office in Tokyo
        
        Supported by an external IFRS Advisory council, ASAF and IFRS for guidance
        
        follows a thorough process
        
        engages with investors, regulators, business leaders at each stage of process (opportunities for public comment, board deliberates meetings are open to publc, public availability to the agenda papers)
        
        collaborates with the worldwide standard setting community
    - - See table 1
        
        Agenda consultation
        
        Research programme
        
        standards developemnt
        -implementation
    - - Soo many risks as financial markets are borderless, companies seeking capital at best place from wherever
      - The use of high quality standards by companies throughout the world improves the comparability and transparancy of financial information and reduces financial statement preperation costs. When the standards are applied rigorously and consitenctly, capital market participants recieve higher quality infomration and can make better decisions.
      - Thus marketes allocate funds more efficiently and firms can achieve a lower cost of caital